Further to your recent article concerning ‘tax avoidance’ (New Statesman 25th November 2011), we would like to take this opportunity to clarify some key points.
Your article uses the terms ‘tax evasion’ and ‘tax avoidance’ as though they were inter-changeable. They are, in fact, very different. ‘Tax evasion’, as referenced in the Tax Justice Network’s recent report, is the illegal concealment of a taxable activity and to be clear, is a criminal offence in Jersey.
‘Tax avoidance’, on the other hand, is legal and refers to the prudent management of tax affairs to legitimately minimise a company or individuals tax liability within the law. Companies, as competitive commercial enterprises, have a duty to maximise profits and minimise costs in order to generate value. Actively seeking to legally manage tax liabilities is simply another form of cost management that is, and should, be exercised by any company that wishes to succeed and prosper as part of the wider economy.
While the concept of tax avoidance, or perhaps as it may be better described, tax planning, is often discussed in relation to business, the exact same principle applies to individuals from all walks of life. Anyone who chooses to invest in an ISA, buy a Premium Bond or invest in a pension could be accused of seeking to ‘avoid tax’ and yet it is plain that such activity is not only legal, but also prudent and sensible.
I repeat, tax evasion is illegal and far from engaging in or encouraging illegal activity, wide-reaching and thorough regulatory and compliance procedures are fundamental components of how a world-class International Financial Centre (IFC) like Jersey operates.
As for undermining the UK economy, this is a simplistic and emotive claim and a great deal of evidence suggests the very opposite to be true. One simple example is the practice of taking international deposits received by banks in IFCs like Jersey and up-streaming those deposits to UK parent-banks where they can be put to work, thus providing many billions of pounds of liquidity and support to UK markets and businesses.
I welcome a debate about tax policy in the UK, but such a debate is not served by seeking to deliberately conflate illegal tax evasion activity with legal and economically beneficial tax avoidance or tax planning practices. It is of great concern that instead of focussing on how tax policy could be used to encourage growth, productivity and employment, the TJN and others appear to be attempting to seduce both the public and the media with a selective and one-sided argument that merely serves to support their own extreme lobbying positions.